iPhone at just over Rs 8,000? Well, may not be

Sujit John, TNNJun 28, 2008, 12.15pm IST

BANGALORE: Vodafone and Airtel started pre-registering customers for the iPhone 3G this week, and ever since, offices and blogs have been abuzz with discussions on what Apple's much-awaited product will be priced at.

Many think it will be just a shade over Rs 8,000 — the rupee equivalent of the price in the US, which is $199. Now, that's a fantastic price for the 8GB product, and will certainly have every competitor worried.

Nokia's 8GB N95 smartphone , for instance, is priced at well over Rs 25,000, and its new N96 is expected to come at over Rs 36,000.

But we think the iPhone, expected to hit the Indian market in September, will be priced substantially higher than Rs 8,000.

The $199 price is a hugely subsidised one, subsidised by the US operator AT&T. Market researcher iSuppli has just estimated that mobile phone service providers are subsidising each handset to the extent of $300.

Some other analysts think the subsidy is higher at $350 per unit. In other words, the actual price that AT&T pays to Apple for each iPhone unit is $499, going by the iSuppli estimate.

Vodafone and Airtel are unwilling to talk about the price they will offer the iPhone at, but Bharti Airtel CEO Manoj Kohli told TOI there is no question of subsidising the handset in India. "US operators are able to subsidise handsets because they can make up for that with their call charges. They charge rates like 25 cents a minute. In India, the charge is 1.5 to 2 cents a minute," Kohli said.

In the absence of a subsidy then, the handset could be priced at $499 or a little over Rs 21,000 (governmental levies on mobile phones in India are marginal).

Unless Apple chooses to offer the iPhone at lower margins to countries like India. iSuppli estimates it costs Apple just $173 to produce the latest version (excluding the cost of software development, shipping, distribution, packaging and accessories included with each iPhone). So it enjoys a huge margin on the product.

We'll have to see if Apple's CEO Steve Jobs is willing to sacrifice some of that.

But any which way, even at a price of Rs 21,000, the iPhone looks certain to sizzle the handset market.